Overcoming fear of fluctuations

Do market down turns scare you off investing?

One of the best strategies to deal with market fluctuations is to have a disciplined investment approach.

If you invest the same sums of money regularly, with a long-term view, this gives you an opportunity to increase investments in the financial market during down turns.

If you are investing regularly, when the market dips, the sum of money you’re investing goes comparatively further (i.e., it buys more shares because their prices are lower). When the market is strong, the same sum doesn’t buy as much (because share prices increased).

This strategy is called dollar-cost averaging and it helps investors to manage volatility. It removes some fear of down turns, and the worry about making purchasing or selling decisions at the wrong time (Note: the approach when investors try to anticipate market movements with their purchases or sales is called ‘timing the market’ and you can get it wrong).

With a disciplined approach to investing, you should never buy or sell based on daily news or market movements. Markets always come back to the mean return over the years, so you should not panic sell when the market is falling. This only converts your investments into losses.

Watch an explanation of how dollar-cost averaging works in this 9 minute YouTube clip Dollar Cost Averaging – the Easiest Way to Get Rich by Chris Invests.